Heathkit used varcaps on their servos. We had problems with them getting out of trim between cool dry days and hot humid days, but I don't know if that was pushrod expansion (Nyrod) or the servos themselves. Maybe I'll play with the old Heathkit and see if I can figure it out. It's been a loooong time!

Mi Servos finally hit the market!
Until now servos have always relied on a potentiometer, however 'Pots'
have always been the root cause of many issues in servos,
from poor accuracy to eventual failure from wear.Now there is a new type of servo that uses a Magnetic Rotary Encoder instea of the old-school potentiometer to control servo arm position.from HobbyKinghttp://www.hobbyking.com/hobbyking/s...14828&aff=8620 It is expensive. $30 in China.

Not a new idea, yet another innovation copied from an existing product by a Chinese manufacturer.
From another group:Well, the technology is out there. Hitec builds a magnetic encoder servo here:HS-M7990TH Mega Torque HV Magnetic Encoder Servo
Whether or not this one is quality is to be seen. For the price, I would give it a shot for something small as it is a mini servo. Actually, the specs are pretty darn good if they are to be believed. I'm surprised that they didn't make a larger servo if they were going to use titanium gears. FWIW, I have had mixed results with HobbyKing sourced servos. The performance was good, but QC was sometimes lacking. YMMV."

I built a kit for servos that used a coil with a metal center that moved with servo arm position to very the inductance of the coil. It worked quite well but was quite expensive and somewhat susceptible to the effects of vibration.

The Futaba "encoder" IS A POT! It's just a fancy word for a pot. I replaced the pots in my 12Z. They are $1.23 each from DigiKey. These "encoders" don't last long. Seems like the old AB pots lasted forever but maybe we didn't fly that much back then.

Both of my telescopes use dual optical encoders. This gives them insane resolution and precision pointing every time. There are two IR LED's and two IR receivers that sit in front of the encoder mask and encoder wheel. One of the reasons they use two is to determine the direction the gearbox is running.

Why not just incorporate similar features in servos? ---- Other than price. I know potentiometers are very inexpensive, but a hall effect sensor's envelope is in my opinion too narrow. What about outside magnetic fields as mentioned previously?